State Taxes Overview: Income, Sales, Property & Estate Tax by State
States With No Income Tax
Nine states impose no state income tax on earned income:
| State | Income Tax | How They Make Up Revenue |
|---|---|---|
| Alaska | None | Oil revenue, no sales tax (but local sales taxes exist) |
| Florida | None | Higher sales tax (6%), tourism taxes, property tax |
| Nevada | None | Gaming taxes, sales tax (6.85%+), no corporate income tax |
| New Hampshire | None on earned income | High property taxes; interest/dividend tax phased out in 2025 |
| South Dakota | None | Sales tax (4.5%), property tax, no corporate income tax |
| Tennessee | None | High sales tax (7%), Hall tax on dividends/interest ended 2021 |
| Texas | None | High property taxes, sales tax (6.25%+), franchise tax |
| Washington | None on most income | High sales tax (6.5%+); new 7% capital gains tax on gains over $250K |
| Wyoming | None | Mineral extraction taxes, low sales tax (4%), property tax |
Highest State Income Tax Rates
| State | Top Marginal Rate | Applies At |
|---|---|---|
| California | 13.3% | $1,000,000+ |
| Hawaii | 11.0% | $200,000+ |
| New Jersey | 10.75% | $1,000,000+ |
| Oregon | 9.9% | $125,000+ |
| Minnesota | 9.85% | $193,240+ |
| New York | 10.9% | $25,000,000+ (plus NYC tax up to 3.876%) |
Flat Tax States
Several states use a flat income tax rate — the same percentage regardless of income level. These include Colorado (4.4%), Illinois (4.95%), Indiana (3.05%), Kentucky (4.0%), Michigan (4.25%), North Carolina (4.5%), Pennsylvania (3.07%), and Utah (4.65%). Flat taxes are simpler but tend to be more regressive.
State Sales Tax Rates
Five states have no state sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. Combined state and local sales tax rates can exceed 10% in some areas. The highest combined rates are found in parts of Louisiana (up to 11.45%), Tennessee (up to 9.55%), and Arkansas (up to 11.625%).
State Estate and Inheritance Taxes
| Tax Type | States That Impose It | Lowest Exemption |
|---|---|---|
| State estate tax | CT, DC, HI, IL, MA, MD, ME, MN, NY, OR, RI, VT, WA | $1 million (MA, OR) |
| Inheritance tax | IA, KY, MD, NE, NJ, PA | Varies by beneficiary relationship |
Maryland is the only state with both an estate tax and inheritance tax. State estate taxes often have much lower exemptions than the federal threshold — Massachusetts and Oregon start at just $1 million, affecting many more families than the federal tax.
Impact on Retirement and Investing
State tax rules significantly affect retirement income planning:
- Some states exempt retirement income (Social Security, pensions, IRA distributions) from tax
- States with no income tax provide the most tax-efficient environment for retirees with investment income
- Capital gains are taxed as ordinary income in most states — but some offer preferential rates or exclusions
- State estimated tax payments are separate from federal and have their own deadlines
Key Takeaways
- Nine states impose no state income tax, but compensate with higher sales, property, or other taxes
- California has the highest marginal rate (13.3%); several states use flat rates between 3–5%
- Thirteen states and DC impose estate taxes, some with exemptions as low as $1 million
- Your total state tax burden depends on income, sales, property, and estate taxes combined
- State tax planning is critical for retirees, investors, and anyone considering relocation
Frequently Asked Questions
Which state has the lowest overall tax burden?
It depends on your income and spending patterns. For high earners, states like Wyoming, Nevada, and Florida offer low overall burdens (no income tax, moderate sales and property taxes). For retirees, states that exempt retirement income and have no estate tax are often most favorable.
Do I have to pay taxes in multiple states?
Yes, if you earn income in multiple states. You file a resident return in your home state and nonresident returns in states where you earned income. Most states offer credits for taxes paid to other states to prevent double taxation, but the process can be complex.
How does remote work affect state taxes?
This is an evolving area. Some states require income tax to be paid where the work is performed, others where the employer is located. A few states (like New York) have a “convenience of the employer” rule that can tax remote workers even if they live in another state. Check your specific state’s rules.
Should I move to a no-income-tax state for retirement?
It can save significantly on retirement income taxes, especially for those with large IRA or 401(k) distributions. But factor in all costs — property taxes, sales taxes, cost of living, healthcare quality, and proximity to family. The tax savings need to outweigh all other considerations.
Do state taxes apply to Social Security benefits?
Most states do not tax Social Security benefits. As of 2024, only about a dozen states tax them at all, and several of those are phasing out the tax or offer significant exemptions. Check your specific state’s rules on Social Security taxation.